DRI Officials Powers to Issue Notices in Tax Evasion Cases may be Restored

New Delhi: The government has proposed restoration of powers of Directorate of Revenue Intelligence (DRI) officials to issue notices in evasion cases through an amendment to the customs act.

The amendment will allow the agency to go ahead with their proceedings in multiple cases that had been put on hold following a Supreme Court decision in the Canon India case.

“The government had to amend the law to specifically prescribe that DRI officers are proper officers and can be designated as proper officers by the board (CBIC),” said Vivek Johri, chairman, Central Board of Indirect Taxes and Customs (CBIC). The court had questioned the status of DRI official as proper officers and also curtailed their power to look at in stances of evasion cases where assessment has been completed.

The Finance Bill, in Section 96, proposed to retrospectively validate any action taken or duties performed by officers of DRI or customs before enactment of Finance Bill 2022, notwithstanding the decisions of the courts, tribunals or authorities.

The amendment was necessitated as the decision would have led to reopening of multiple cases closed in the past, officials said.

“The SC ruling was a big blow. We had at least 15 largest tax evasion cases where despite all evidence, the proceedings were put on hold. Now we can move forward,” a senior DRI official said, without divulging any further details on the cases.

Following the SC ruling many exporters dragged DRI to different high courts and tribunals across the country who quashed show cause notices issued by DRI on tax evasion based on SC ruling.

The CBIC last year directed its officers that show –cause notices issued by the officers of DRI should be kept pending after their jurisdiction was challenged.

Now, with the amendment, decks are cleared for the DRI to proceed in pending investigation cases.

Johri, however pointed out that the amendment will not give DRI officers the right to undo an assessing officers.

“In case of goods that have already been assessed to duty they come to a finding that the duty has been short paid or not paid or incorrectly, they will prepare an investigation report and send it to the assessing officer, who then will issue a showcase. So we’ve kept that demarcation of jurisdiction. We made it very clear in law itself,” Johri added. He said in cases where the assessment has not happened, DRI can come in and will be able to issue a notice.

Experts said the move is likely to impact pending matters where in assessees had challenged jurisdiction of the DRI to issue show cause notice.

“Issue of show cause notices by DRI officers is expected to increase, given the powers bestowed on them by this amendment. Extensive litigation by the industry, challenging the constitutional vires of such a retrospective amendment, is also foreseen,” Anushree Roy, director, indirect tax, Nangia Andersen LLP, said.

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